By Xie Yu and Clare Jim
HONG KONG, Feb 24 (Reuters) - Chinese property developer
CIFI Holdings Group Co Ltd is having difficulty
finding domestic buyers for new debt despite state-backing for
the issue, sources said, underscoring investor doubts about the
sector's recovery prospects.
Shanghai-based CIFI, which has previously defaulted on
offshore debt, started accepting investor interest for a bond
issue of up to 2 billion yuan ($289 million) on Jan. 13,
according to a term sheet seen by Reuters.
As much as three-quarters of that debt is guaranteed by
state-owned China Bond Insurance Corp, a separate credit
enhancement letter shows.
Despite that, the deal has yet to be completed as it has not
been able to garner sufficient interest from local debt buyers
who would typically include major banks and asset managers, four
people with knowledge of the matter said.
By comparison, at least three other private sector Chinese
property developers including Agile Group Holdings ,
successfully issued onshore debt in January. The time taken from
bond registration to issuance typically took a month.
Efforts are still in train to complete CIFI's sale, said the
people who declined to be identified as they were not authorised
to speak to media.
A representative for CIFI declined to comment. China Bond
Insurance Corp did not immediately respond to a request for
comment.
China's property sector has since mid-2021 been grappling
with a severe liquidity crisis - initially triggered by
government moves to rein in ballooning debt - with many
developers defaulting on or delaying debt payments as they
struggle to sell apartments and raise funds.
While Beijing has since rolled out supportive measures for
the sector which have helped dollar bonds for Chinese developers
rally since late November, CIFI's difficulties in raising fresh
capital via debt issuance highlight investor scepticism that the
sector will see a near-term recovery in sales amid slow economic
growth.
Only the strongest players are likely to tempt investors,
analysts said.
"People are taking a reality check and...(are) realising
that for the distressed guys, it's still going to be very
difficult," said Sandra Chow, co-head of Asia-Pacific research
at CreditSights.
One of the sources, an official at a Chinese state bank,
said his firm had no plans to buy bonds from developers that
have defaulted even if the debt has state guarantees, unless
they were told by regulators they would be protected if the
developer goes under.
CIFI, China's 18th largest property developer by sales,
suspended payments on all of its offshore debt in November after
it failed to reach an agreement with creditors who are owed a
combined $414 million.
It said earlier this month that there had been no delays or
defaults with regard to its onshore debt payments.
Around half of the 30-odd Chinese developers listed in Hong
Kong have defaulted on or delayed bond payments since late 2021
and industry sources have said they are struggling to gain
access to new funds. Even developers that have not defaulted are
finding it hard to procure funds, the sources added.
Repayment pressure on small private developers without
defaults is also unlikely to ease, "as most have insufficient
high-quality unpledged assets to secure additional bank loans or
state guarantees", Fitch Ratings said in a report on Thursday.
(Reporting by Xie Yu and Clare Jim; Additional reporting by
Anne Marie Roantree; Editing by Sumeet Chatterjee and Edwina
Gibbs)
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